Microsoft Loopback adapter on VirtualPC

I finally figured out a problem with my SharePoint development image on VirtualPC. Ever since I configured it (again) a few weeks ago, I could not establish network communication between the virtual machine and the physical host. I configured the Microsoft Loopback adapter as described in various posts on the Net (such as this one, but I stillcouldn’t connect.

I stumbled on the solution earlier today. It turns out, you need to install Virtual Machine Additions for VirtualPC, and this is done while the virtual machine is running. The VMA appears as a mounted CD in the OS, and you need to run the Setup to install the additions. After I installed them, I was able to connect to my physical host.